Wednesday, March 31, 2010

Flat Tax: How it Works and Why It's Good for U.S.

This Center for Freedom and Prosperity Foundation video featuring Dan Mitchell of the Cato Institute shows how the flat tax would benefit families and businesses, and also explains how this simple and fair system would boost economic growth and eliminate the special-interest corruption of the internal revenue code.

If you're getting frustrated completing your tax returns for 2009, note the easy-to-fill-out postcard-size tax forms that would be a key feature of a flat tax. It reminds me of the very first IRS Form 1040, which was a one-page tax form with two pages of simple worksheets, and one page instructions for a grand total of only four pages, view it here.

7 Comments:

Dan Mitchell does a good job of making the subject a 6 minute explanation Six minutes is about right as it’s a simple idea. The reason the flat tax makes very good economic sense is that it is the least expensive and simplest solution that actually solves the problem.

Mitchell mentions that the class warfare crowd (progressives) misunderstands the flat tax. However, Mitchell misses one point about progressives: they derive their power from the “transfer payment”. The transfer payment gives the progressive the power to paint the world in their own self image.

Hence even with a flat tax, the progressive’s endless list of pet social engineering projects will merely cause progressives to be ever campaigning for a higher and higher flat tax. Its expensive to paint the world in your own self image!

Hence the flat tax needs accompanied by a law requiring the Federal Government to only provide the duties they were originally required to do (Common defense and a few other items). In other words, the federal flat tax level matches the limited duties of the Federal Government.

The interstate commerce clause needs enforced to the benefit of the several and many states and ultimately their citizens.

With government decentralized and ran on a local basis rather than the central planners of W.D.C, any economic security issues are decided on a local basis. No more will the environment be available for progressives to scheme with money that is five times removed from the tax payer.

Hence progressives will be forced to the local level where tax will become a local issue as well as government being local. Painting their own self image on a local basis will show the light of day on their anointed/intelligentsia view and the locals, with grand common sense, will likely reject views based on notions.

MF favored the progressive consumption tax to fund wartime efforts, and authored a seminal piece in the American Economic Review in 1943 to that effect.

Since that time, we have permanently mobilized, especially in light of the Global War on Terror.

President Bush called himself a "War President" and many on the right call this "The Long War" that might last 80 years. We may end up with permanent military bases in the MNideast to match thosein S. Korea and Germany, in addition to the 1,000 military installations we have globally.

Indeed, we will spend $10 trillion in the next 10 years on national defense.

Fair enough--but MF would say this perma-war effort should be financed by a progressive consumption tax.

The instanances of flat tax experimentation have ended poorly (Latvia comes to mind.) The simple fact is our current tax system is regressive with the highest incremental tax rate on the last dollar of income exposed to SS tax (approx. $100k.) I doubt the citizens of the US will go for a VAT because they want to see the governments sources of funds and VAT's are largely invisable.